AEI: Crony Capitalism Drives Corporate Profits

A sheet of freshly printed one dollar bills is ready for inspection at the Bureau of Engraving and Printing on March 24, 2015 in Washington, DC. The roots of The Bureau of Engraving and Printing can be traced back to 1862, when a single room was used in the basement …
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From James Pethokoukis writing for the American Enterprise Institute:

It’s one thing when a company generates profits from creating value. That’s a beautiful thing. But how about when the profit comes from manipulating the political system? If that latter situation is commonplace, then rising profits might show something is deeply wrong with an economy.

Such a situation could, as James Bessen writes in Harvard Business Review, “represent a decline in competition and, with that, a decline in economic dynamism. While a dynamic, competitive economy rewards innovative firms with high profits and punishes poor performers with low profits, sustained aggregate profits suggest, instead, that firms are able to get away with higher prices because competition is limited. Firms engage in political ‘rent seeking’—lobbying for regulations that provide them sheltered markets—rather than competing on innovation. If so, then high profits portend diminished productivity growth.”

Innovation or manipulation?  What’s driving profit growth in the US?

Read the rest of the story at AEI.

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